SIP-PRESENTATION by RR Financial Consultants

Information about SIP-PRESENTATION by RR Financial Consultants

Published on August 4, 2014

Author: rrfinance

Source: authorstream.com

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Systematic Investment Plan (SIPs): Systematic Investment Plan (SIPs) RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: I don’t have enough money to invest I’m too busy making money to worry about managing it. I don’t have the time or expertise to follow market movements and make investments at the right time SIP is an investment program that allows you to contribute a fixed amount (as low as Rs. 1000/-) in mutual funds at regular intervals. RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: You must have heard this statement more than n times now that … “ S I P i s t h e b e s t i n v e s t m e n t s t y l e ” So let’s understand why SIP has emerged as the most powerful style of investing in recent times through So m e r ea l li f e ex a m p l e s… . RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: There are basically three points that makes SIP such a strong concept R up e e C o s t A v e r a g i n g P o w er of C o m p o und i n g M a r k e t t i m i n g i r r e l e v a n c e L e t u s s i m p li f y t h e s e t e rm s i n n e x t f e w s li d e s… RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: R up ee C o s t A v e r a g i n g To understand this concept more practically look at the illustration below. The SIP investor finishes with an investment that is worth more than the lump sum investor after six months - even though the starting price and finishing price are exactly the same. Unlikely but it is true. Check the figures yourself …. This is the first thing what SIP does; it averages the buying cost automatically. RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: P o w er o f C o m pound i n g This mathematical formula of compounding : FV = PV (1 + r) is known to all of us but is seldom understood in terms of investing. Let’s use an i.e.: If you invested Rs. 100000 PV (Present Value) in a instrument that grows @ 15% per year (the r) for a period of 25 years (the n), its FV (Future Value) will become Rs.3291895 . Unbelievingly the amount multiplied to a whopping 33 times Now the let’s see how the same compounding plays in a SIP over a period of time. The table below justifies all statements of the Power of Compounding. A meager amount of Rs. 1000 per month over 25 years at an annualized growth rate of 15% accumulates to a humongous number of approx Rs. 33 lakhs RR Investors Retail Services (P) Ltd. www.rrfinance.com Market timing is irrelevant: M a r k e t t i m i n g i s i r r e l e v a n t D ata S our c e : Bloo m be rg L e t ’ s l oo k a t t h e a b o ve a n a l y s i s i n t h e n e x t s li d e w h e t h e r i t a c t u a ll y h a pp e n s … RR Investors Retail Services (P) Ltd. www.rrfinance.com Time in the market matters Market Timing VS not timing: T i me i n t h e m a r k e t m a tt e r s Market Timing VS no t t i m i n g D ata S our c e : Bloo m be rg * C A G R ( C o m pound A nnua l G r o w th R a te ) - Th e ye a r- o ver-ye a r g r o w th r a t e of an i nve s t men t o ver a sp e c i f i e d p er i od of t i m e RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: Now that we have seen the Power of SIP; let’s try to address this point … “ W h e n SI P w o r k s b e s t f o r u s ” F e w s li d es f r om h e r eon w il l e x p l a i n t h i s m o r e cl ea r l y…. RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: S IP w il l w ork b e s t if f o ll o w i n g a c ts a r e d o n e: S t a r t E a r l y I n v e s t R e g u l a r l y I n v e s t f o r L o n g T e rm I n v e s t i n th e R i g h t A ss e t C l a ss RR Investors Retail Services (P) Ltd. www.rrfinance.com Invest Regularly: I n v e s t R e g u l a r ly RR Investors Retail Services (P) Ltd. www.rrfinance.com Invest for Long Term: I n v e s t f o r L o n g T er m D ata S our c e : Bloo m be rg L o w e r t h e r i s k G r ea t e r t h e e f f e c t o f c o m pou n d i n g M o r e p r e d i c t a b l e a v e r a g e r e t u r n s Hence longer your SIP Period RR Investors Retail Services (P) Ltd. www.rrfinance.com Invest in the Right Asset Class: I n v e s t i n t h e R i gh t A ss e t C l a s s Und o u b t e d l y E qu i t y i s t h e w i nn er o v e r t i m e … RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: Now that we have seen why and how SIP can best work - a question still remains unanswered …. Can SIP help individuals like you and me in real life situation to meet our financial goals ? Let’s try to answer this question through a simple case study and see whether benefits of SIP really work … RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: C a s e St ud y – R e a l L i f e S i t u a t i o n Assume – You are 30 yrs of age; have a wife and kid Current Annual expenditure of Rs. 5,00,000 Retirement expected at age 60 yrs More – Average prices (i.e. inflation) will rise by 7% pa After 30 yrs when you retire, the low risk rate of return will be 6% pa (Considering you put all your accumulated corpus post retirement in a bank deposit) You will live for more 20 years post retirement So let’s see what will be the corpus required at the time of your retirement to maintain the same current lifestyle additionally with enhanced medical expenses RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: Current Expenditure Rs.5,00,000 p.a. Inflated at 7% p.a. for 30 years Expenditure at the time of Retirement Rs. 36,00,000 p.a. I n c om e t o be g e n e r at e d p o s t R e t i r eme n t R s . 36 , 00 , 000 p . a. Corpus Required at the time of Retirement Your first reaction Impossible! It cannot be achieved. But then there is a solution… Therefore to generate this income every year post retirement you need to accumulate a corpus R R Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: So w h a t ’ s t h e So l u t io n … J u s t o n e s i m p l e t h i n g Subscribe for an SIP of Rs.15,000 per month in a good diversified equity fund for 30 years and forget it You still don’t believe it that it can be that simple; let us validate our conviction with actual returns generated in a equity fund over the years From the table it is crystal clear that if an investor did an SIP of Rs.15000 per month in Equity Fund for 15 years, he would have invested 27 lacs and that would have grown to a whopping number of 3.4 crore as on date; in spite of so many pitfalls in equity markets in last 15 years. Equity Fund SI P I n v e s t m e n t s 1 5 y ear SI P 1 0 y ear SI P 5 y ear SI P 3 y e ar SI P T o t al Amo u n t I n v e s t ed @ Rs. 15000 p er mo n t h ( Rs. ) 2,700,000 1,800,000 900,000 540,000 M ar k e t V al u e as on J u ly 29, 2011 (Rs. ) 34,379,093 8 , 682,024 1,427,405 798,522 Re turns ( A nnu a li z e d ) * ( %) 29.87% 29.64% 18.56% 27.29% B e n c h mark R e tu r n s ( A nnu ali z e d )( % ) # 15.87% 18.42% 8.36% 14.08% M ar k e t V al u e of S I P in B e n c h mar k # 9,967,057 4,737,4 2 3 1,110,339 664,982 RR Investors Retail Services (P) Ltd. www.rrfinance.com PowerPoint Presentation: Still need to think; No pressure but see this what the delay can cost in the same case study 10 15 25 30 Time to Retirement (yrs) 9 , 60 , 000 5 , 76 , 000 2 , 32 , 000 1 , 80 , 000 A nnua l 80 , 000 48 , 000 21 , 000 15 , 000 M o n t h l y I n v e s t m e n t Re qu i r e d Current Age : 30 years Retirement Age : 60 years Retirement Corpus to be accumulated : 8 cr. Assumed Rate of Return on Investment : 15% p.a. With every passing year the time to retirement is reducing and increasing the burden of investment required. Now the choice is our whether we want TO START NOW OR STILL WAIT.. T o d a y After 5 years from now After 20 years from now After 15 years from now RR Investors Retail Services (P) Ltd. www.rrfinance.com Thank You: Thank You RR Investors Retail Services Pvt. Ltd. Email: [email protected] Toll Free: 1800110444 Telephone: 011-23636363/2 Website: www.rrfinance.com RR Investors Retail Services (P) Ltd. www.rrfinance.com

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